Geopolitics, Power and Political Economy

Tag Archives: Capitalism Reform

The Boeing 737 MAX story is getting worse. Just when you thought you had the whole story, you find more ugliness underneath. Ralph Nader published an open letter to Dennis A. Muilenburg, CEO of Boeing, and it’s quite the takedown, capturing the essence of Boeing’s problem:

“Aircraft should be stall-proof, not stall-prone.”

The stall-prone MAX was supposedly fixed, but then it failed. Nader has a personal interest in the MAX’s problems, since his niece, 24-year-old Samya Stumo, was among the 157 victims of an Ethiopian Airlines flight crash last month. Here’s a part of his letter:

“Your narrow-body passenger aircraft – namely, the long series of 737’s that began in the nineteen sixties was past its prime. How long could Boeing avoid making the investment needed to produce a “clean-sheet” aircraft and, instead, in the words of Bloomberg Businessweek “push an aging design beyond its limits?” Answer: As long as Boeing could get away with it and keep necessary pilot training and other costs low…as a sales incentive.”

Nader draws a connection between Boeing’s decision to “push an aging design” and their financial engineering.

“Did you use the $30 billion surplus from 2009 to 2017 to reinvest in R&D, in new narrow-body passenger aircraft? Or did you, instead, essentially burn this surplus with self-serving stock buybacks of $30 billion in that period?”

Nader notes that Boeing is one of the companies that MarketWatch labelled as “Five companies that spent lavishly on stock buybacks while pension funding lagged.” Their pension fund is only 79.6% funded. More:

“Incredibly, your buybacks of $9.24 billion in 2017 comprised 109% of annual earnings….in 2018, buybacks of $9 billion constituted 86% of annual earnings….in December 2018, you arranged for your rubberstamp Board of Directors to approve $20 billion more in buybacks.”

Nader’s focus on stock buybacks shows that Boeing had the capital to invest in developing a new plane. From Bloomberg in 2019:

”For Boeing and Airbus, committing to an all-new aircraft is a once-in-a-decade event. Costs are prohibitive, delays are the norm and payoff can take years to materialize. Boeing could easily spend more than $15 billion on the NMA, according to Ken Herbert, analyst with Canaccord Genuity….”

NMA means the New Middle-of-the-Market Aircraft. Boeing has already spent a total of $30 billion in share repurchases, with another $8 billion to come in 2019. A new aircraft would have cost half of that amount.

The 737 MAX was Boeing’s answer. It allowed them to continue their share buybacks while paying for the 787 cost overruns. Abandoning the 737 for a new plane would’ve meant walking away from its financial golden goose. OTOH, someone should be responsible for the 346 deaths Boeing’s MAX has caused.

Finally, there are reports that some pilots are giving the MAX a vote of no confidence. The FAA has opened another 737 Max investigation based on reports on the FAA whistleblower hotline:

“A source familiar with the matter says the hotline submissions involve current and former Boeing employees describing issues related to the angle of attack sensor — a vane that measures the plane’s angle in the air — and the anti-stall system called MCAS, which is unique to Boeing’s newest plane.”

“American Airlines pilots have warned that Boeing’s draft training proposals for the MAX do not go far enough to address their concerns, according to written comments submitted to the FAA.”

Stock buybacks like Boeing’s were once illegal because they are a type of stock market manipulation.

But in 1982, then President Reagan wanted to do his banker buddies a favor. So his Securities and Exchange Commission passed rule 10b-18, which created a legal process for share buybacks. That opened the floodgates for companies to start repurchasing their stock en masse.

Is it too much to ask that the Boeing CEO be asked to resign, even if he did kill a lot of people?

New Macallan Distillery – 2018 photo via ArchDaily. There are 952 different bottles to taste on site. Bring a designated driver.

Capitalism in America has gotten bad enough to attract the attention of The Economist:

“Two things stand out about business in America today. One is how successful American firms are: they account for 57 of the world’s 100 most valuable listed firms. The other is the bad smell hanging over a number of powerful companies.”

No one says that The Economist has a liberal worldview. They are the news journal of globalism and neoliberalism. But, even they think that the time has come to revisit how we treat our largest companies.

They go through a litany of all-too-familiar corporate abuses.

Boeing selling 737 MAX planes with dangerous software that you had to pay extra to get.

Criminal charges have been filed against Goldman Sachs in Malaysia for its role in arranging $6.5 billion of debt for a fraudulently run state fund.

A jury in California has just found that Monsanto failed to warn a customer that its weed killer could cause cancer.

Purdue Pharma is the subject of a lawsuit by New York’s attorney general, along with McKesson and Johnson & Johnson.

The Economist points out that America has been no stranger to corporate scandals. In the 19th century meat packers sold rotten meat. In the 1960s, Detroit made cars that were in the words of Ralph Nader, “unsafe at any speed”. In the 1990s, tobacco companies and asbestos manufacturers had to settle class action suits that cost them more than $150 billion.

In the early 2000s, WorldCom, Enron and Tyco committed accounting fraud. And nobody forgets the mortgage fraud by our large banks and insurance firms that caused the Great Recession in 2008.

Back to the Economist: (brackets by Wrongo)

“Today’s crises…have common elements. The firms tend to be established, with dominant market positions. Outrage infuses social media and Congress. And yet the financial cost [to these bad actors] has been limited.”

They say that of ten big American listed firms involved in scandalous episodes, their median share price only lagged the stock market by 11% after the event. And just two of the CEOs at scandal-ridden firms were fired. Worse, for the ten firms, the total pool of senior executive pay has risen over the four most recent years to almost $600 million.

Doesn’t corporate America just see these things as the cost of doing business?

We need to remember that this just doesn’t happen here. Volkswagen cheated on emissions tests, as did Audi and Nissan. Sweden’s Swedbank is facing a criminal investigation for money-laundering.

American capitalism needs reform. The Economist says that in the past, three forces constrained corporate conduct: regulation, litigation and competition. Since the 2008 financial crisis, each of these three forces have been weakened by both our elected officials, and by US regulators. This provides an incentive for firms to take an extended walk on the wild side.

First, America’s regulatory system features both capture and incompetence. The FDA has allowed opioids to be sold in huge numbers, clearly beyond what was medically necessary. The FAA delegated its inspection process to Boeing. The FTC can’t police Facebook. The Fed, the FDIC, and the Comptroller of the Currency, our bank regulators, fail to indict bank executives. They impose fines that are small, relative to value of the gains made by rules breaking.

Second, litigation is no longer a deterrent. The Economist says that:

“Criminal cases leading to jail terms for top executives are as rare as socialists at Goldman Sachs.”

The same is true for civil actions. Arbitration clauses cause both customers and employees to forfeit the right to pursue class actions. Firms are more likely to extend cases by appealing, which can take years.

Finally, we all expect the market will punish bad behavior by corporations, because customers have options. But we know that America’s corporations have gotten larger, primarily by acquisition. That makes it harder for angry customers to move to competitors. There’s just one alternative to Boeing; Airbus, but it doesn’t have spare capacity. Users aren’t leaving Facebook. If you need OxyContin, you have just one source. Try changing your cable provider.

Econ 101 shows that the trajectory of monopoly begins with economies of scale, and ends with economies of exploitation. And remember that six corporations own 90% of the media. We won’t hear much about wrongdoing at Amazon from the WaPo.

Voters need to push for more enforcement of regulations, which can only be done by the federal government.

We have to insist that the protection of citizens is more important than protecting corporations and the 1%.

Poppies in bloom, Southern California – March 2019 photo by Leslie Simis. This annual explosion of color is enhanced this year by extraordinary rainfall

You can call the period in US history from FDR to Nixon “America’s social democratic era”. A collection of politicians had hammered out the policies and regulations that became FDR’s New Deal in America. It became a period of post-war prosperity during which inequality narrowed, economic growth boomed, and optimism reigned.

The characteristics these policies shared were reciprocity and generosity. For the citizen, there was some form of social support that grew from Social Security in 1935 through the 1960’s with Medicare and Medicaid. In 1970, Nixon implemented the Environmental Protection Agency. There was also a willingness to care for the disadvantaged. Our Marshall Plan and our commitment to foreign aid are both great examples. The success of social democracy in the postwar era weakened the market’s power to act independently within our society.

But then things changed. Our government’s role became a helpmate for corporations, financial institutions, and their lobbyists. The result has been growing inequality between suppliers of capital and the suppliers of labor, even of highly educated labor, like teachers and professors. Economic growth slowed, and we have developed a permanent underclass that seems impervious to repair.

Yesterday, we talked about Economic Dignity, and how focusing on it might help solve inequality. Today’s market economics is partly based on the ideas of Jeremy Bentham and John Stuart Mill, economists who viewed human beings as supreme over the state. As individuals who would make rational decisions to maximize utility. It turned out to be incomplete, since it left out key dimensions of human psychology, like the individual’s need for social esteem or respect. In other words, they ignored economic dignity.

Couple that with Milton Friedman’s idea, that the mission of the firm is to solely maximize profits, that any responsibilities to its employees, consumers, or society should be ignored. Profit maximization at all costs has done great damage to American society. And conservatives and free marketers have married the ideas of these three economists, making the removal of government from markets their primary mission.

But what they call “the market” is really a bundle of regulatory (and non-regulatory) rules by which market activities operate. The mix of free and regulated market activities can be changed, even though capitalists say we shouldn’t change the rules, because it adds uncertainty to markets.

Just because in baseball, three strikes and the batter is out, or with four balls, there is a free pass to first base, doesn’t mean it has to be that way. It could be five strikes and you’re out, or three balls is a walk.

As an example, we tend to fight unemployment with “trickle-down” solutions. That means we bribe the rich and corporations to hire more. But, the bribe is always bigger than the payrolls that are generated.

We could fight unemployment with fiscal policy, such as infrastructure spending by the government. It would employ many, possibly hundreds of thousands, and there would be no need to pay any entity more than was warranted by the tasks at hand.

America needs a return to what economist Paul Collier calls the “cornerstones of belonging”— family, workplace, and nation, all of which are threatened by today’s market driven capitalism. That means capitalism has to return to the ethics of the New Deal. Joseph Stiglitz, Nobel laureate in economics, says: (parenthesis and emphasis by Wrongo)

Over the past half-century, Chicago School economists, (including Milton Friedman) acting on the assumption that markets are generally competitive, narrowed the focus of competition policy solely to economic efficiency, rather than broader concerns about power and inequality. The irony is that this assumption became dominant in policymaking circles just when economists were beginning to reveal its flaws.

Stiglitz says we need the same resolve fighting for an increase in corporate competition that the corporations have demonstrated in their fight against it. We’ll need new policies to manage capitalism.

It means higher taxes on profits.

It means paying workers more.

It means rebuilding public assets like roads.

It means teaching students to be both technically capable, and grounded in their values.

“Just this week, more than 100 Democrats in Congress signed up for a socialist takeover of American health care.”

“America will never be a socialist country — ever.”

“If these socialist progressives had their way, they would put our Constitution through the paper shredder in a heartbeat.”

“We believe in the American Dream, not in the socialist nightmare.”

Steve Benen notes that Senate Majority Leader Mitch McConnell (R-KY), indicated that the Voting Rights Bill passed by the House as HR-1 was a “radical, half-baked socialist proposal”. Benen goes on to say:

Perhaps the GOP is redefining socialism as: Any legislation or policy that would diminish the power of the far right, or diminish the wealth differential enjoyed by their business elites.

An NBC News/Wall Street Journal poll showed that just 18% of Americans had a positive view of socialism, 50% had a negative view, and 26% had a neutral view. Most of the skepticism about socialism comes from older American generations. People who are nearly Trump’s age grew up fearing nuclear war. They saw the Soviet Union as an existential threat to the US.

OTOH, Axios reports that 73% of Millennials and Gen Z think the government should provide universal health care. They will make up 37% of the electorate in 2020. And Gallup found that Americans aged 18 to 29 are as positive about socialism (51%) as they are about capitalism (45%).

Vilifying socialism might be a winner for the GOP, unless the Democrats hammer home a series of ideas. First, that Social Security and Medicare aren’t socialism or socialized medicine. Second, that we socialize corporate losses all the time. The taxpayers bailed out banks, capitalists and speculators 10 years ago. We also bailed out GM and Chrysler.

We bail out corporations that do not pay for “externalities”. Externalities are the indirect costs incurred because of actions taken by someone else. Think about pollution. When a manufacturer can make its decisions based on their bottom line, it makes sense for them to dump waste into our rivers or air, pushing the costs of cleanup onto society as a whole.

Today’s GOP is pushing quickly to gut regulations in order to protect the industries of their big donors from paying the cost of these externalities.

Third, reforming capitalism isn’t socialism. Reform is necessary for the economic future of the country. The current neoliberal form of capitalism dominates both our economy and our thinking about economic success. And in the past 40 years, we’ve changed the rules of the game for corporations. We’ve moved the fifty yard line much closer to the capitalists’ goalpost than it was during FDR’s time.

And corporations and capitalists have been running up the score in the economic game ever since.

Neoliberal capitalism has made selfishness an economic and moral good. One result was that improving our economic security, or our social safety net, can no longer be discussed in our society.

These goals are within America’s capabilities, but they come with costs, costs that will not be willingly paid for by corporations, or by “public-private partnerships”. They will only come about with direct government intervention, primarily by implementing policies that encourage them, and by a new tax policy that finances them.

Nothing in the above requires state ownership of corporations, so we don’t have to talk about socialism.

Our market economy should remain, but capitalism needs to be different, because its current track cannot be sustained if we want to contain and correct income inequality, or deal with climate change. Today’s capitalism is creating concentrations in most industries, driving out the little firms. Price gouging is an issue, particularly with big Pharma.

Everyone should agree that companies above a certain size must pay for the externalities they create. That they should also pay a larger share of their profits as taxes. And that they should pay a fee for domestic jobs lost to overseas locations.

2020 should be about those who want to reform capitalism, and how to do it. It shouldn’t be about Trump’s trying to paint Democrats as Soviet-era socialists.

The NYTreported that Rep. Tom Emmer (R-MN), chairman of the National Republican Congressional Committee, said: (brackets by Wrongo)

“Socialism is the greatest vulnerability by far that the House Democrats have…He added that he had also instructed his team to spotlight “all the [Dems] extreme wild ideas on a daily basis, on an hourly basis if it’s available.”

As we said yesterday, most Democrats are not socialists. They are for reform of capitalism. The problem is that our economic system is broken; it does not meet the needs of the vast majority of our people.

Capitalism has metastasized into a financialized cancer. Its growth-at-any-cost, profit-over-purpose ideology has wreaked havoc with the lives of millions of people. From Forbes:

“One example: For more than 400 years, 12.5 million Africans were kidnapped, enslaved and sold to build wealth and power largely for white men in the US, Europe and South America. The first enslaved Africans were shipped directly to the Americas in 1518, one year after Martin Luther nailed his 95 Theses to the door of Castle Church. The centrality and largely unconstrained profit motive in capitalism has been with us since the beginning.”

Today, corporations track our every movement. Algorithms manipulate us to buy things, or to vote certain ways. We’ve put outsized power into the hands of corporations. We have to ask: What do we need from capitalism in the 21st Century? Is it more of the same, or something different?

Capitalist Reform is about re-imagining the purpose of business and redefining its success. The doctrine of shareholder primacy must be the first to go. It needs to be recognized as a form of oppression of human nature since it doesn’t value our humanity.

According to a 2019 Politico/Morning Consult survey, 76% of registered voters want the wealthiest Americans to pay more. Politico also notes that a recent poll from Fox News shows that 70% of Americans supporting increased taxes for those earning more than $10 million, and 54% of Republicans also supported it. People are contemplating not just piecemeal tax increases, but a wholesale reversal of the Reagan-era shift in tax policy. The Economist reported that in 2016, more than half of young Americans no longer support capitalism.

There is an urgent need to push back against the widening economic inequality in the US. Taxing the rich is an easy answer, because so few of us are rich.

But, step one should be increasing corporate income taxes. Corporations’ share of total taxes paid has decreased to about 9% of total US tax revenue in 2017, from about 33% in 1952. How many stories like Amazon’s failure to pay anything in taxes on $11 billion in profits should it take to begin the task of closing corporate tax loopholes and increasing corporate income taxes?

Step two is to break up corporate concentrations. Wrongo addressed this here. The primary issue with corporate concentration is that it drives up prices. The fewer sellers, the fewer choices consumers have for goods and services, and thus, there is little pressure for big competitors to hold prices down.

Step three is to help workers. The share of profits that goes to workers must increase. This shouldn’t punish capitalists. Higher wages for workers means more business for American companies.

We were founded on republicanism as a public virtue: The Constitution implies that a citizen is duty-bound to abandon self-interest when it conflicted with the General Welfare. Capitalism has usurped republicanism by insisting that abrogation of self-interest violates the doctrine of “survival of the fittest,” and it’s also an attack on individual liberty.

We need to revive the understanding of public virtue. So, some form of “mixed economy” is in our future. It’s obvious to all except right wing ideologues that socialized medical insurance is in our future. But it is doubtful that a majority want to socialize production and distribution of America’s products and companies.

The task for Congress and the next president is to figure out what activities and/or economic sectors are best guided by tax and economic policy, and which are best left to “market forces”.

We’re a country where vast wealth is rewarded with tax cuts, loopholes, and endless ways to ensure that corporate dollars earn even more dollars. While average people are bankrupted because of a health crisis, and we value semi-skilled labor at $7.25 an hour.

Today’s capitalism is anti-democratic. General welfare and public virtue derive from a desire to improve the human condition. That needs to be the goal of political action to reform capitalism, and it needs to be hammered home again and again.

(Email publishing of The Wrongologist should be restored as Wrongo is using a different vendor, WordPress. Apologies to those who read in email.)

The Daily Escape:

Cliff Palace, Mesa Verde National Park, Colorado, as it might have looked at night in the 12th Century lit by camp fires.Mesa Verde is unique since it is the only NP that preserves the works of man – photo by Rick Dunnahoo

This is going to be a historic year, even when compared to 2018. And it’s starting out with a bang. The government is shut down, half the cabinet is empty, the 2020 presidential race has officially started, and the Democrats are taken over the House.

And that’s without whatever Mueller shoe will drop sometime in the year, or whatever Twitter atrocities Trump decides to commit. In other words, we’re going to have our hands full.

But today, let’s talk about how bad the economy is below the surface of the headline numbers. Debt is rising, and rising debt is supposed to be matched by rising income. It shouldn’t be a surprise that more income is required in order to service more debt. But so far, in the 21st century, for the bottom 90%, debt is growing while income is stagnating.

Pew’s Fact Tank has an analysis that speaks to this problem. Average hourly earnings for non-management private-sector workers in July were $22.65, 2.7% above the average wage from a year earlier. But in the years just before the 2007-08 financial collapse, average hourly earnings often increased by around 4% year-over-year.

And during the high-inflation years of the 1970s and early 1980s, average wages commonly jumped 7%, 8% or even 9% year-over-year.

However, after adjusting for inflation, today’s average hourly wage has about the same purchasing power it did in 1978. In fact, in real terms average hourly earnings peaked more than 45 years ago: The $4.03-an-hour rate recorded in January 1973 had the same purchasing power that $23.68 would today.

Here is Pew’s chart demonstrating the problem:

Because there’s been little growth in wages, the growth in the standard of living for those below the 90th percentile has been largely fueled by additional consumer debt. The WSJ reports that consumer debt, including credit cards, auto and student loans and personal loans, is on pace to top $4 trillion in 2019, the highest in history. Debt allows you to furnish your home, pay for education, and get a car without having to save for them. In that way, it supports the growing economy.

But Pew also shows how most of the income gains went to those at the top of the food chain:

Among people in the top 10th of the distribution, real wages have risen a cumulative 15.7%, to $2,112 a week – nearly five times the usual weekly earnings of the bottom tenth ($426).

This lack of symmetrical growth in debt and income actually matters. At some point household borrowers will default in greater numbers than they do today. When those losses occur, the monetary system won’t be able to bail out debtors (or banks) this time around as handily as we did in 2008.

Sluggish and uneven wage growth is a key factor behind widening income inequality in the US. Another Pew Research Center report found that in 2016, Americans in the top tenth of the income distribution earned 8.7 times as much as Americans in the bottom tenth ($109,578 versus $12,523).

Compare that to 1970, when the top 10th earned 6.9 times as much as the bottom 10th ($63,512 versus $9,212).

There is no simple solution to get American workers back on the right track. At a minimum, it will take a political groundswell aimed at overturning the way the tax code favors corporations. Along the way we will have to displace the political power of our corporate oligarchs.

Government must be made to serve the public interest, not Mr. Market.

Democracy is the sole mechanism enabling our citizens to have political and economic agency. But, democracy will cease to matter in a corporate-controlled, globalized system of government influence.

More than 1,000 young people and allies flooded the Capitol Hill hallways and offices of Democratic representatives to demand that elected officials listen to their youngest constituents—as well as some of the world’s top scientists—and back the bold proposal to shift the US to a zero-carbon energy system by 2050 in order to save the planet from an irreversible climate catastrophe.

The protesters were mostly members of the youth-led Sunrise Movement, 800 of whom had attended a training on lobbying members of Congress and their staffers the previous evening. They carried signs reading, “Do Your Job,” “Back the Deal,” and “No More Excuses“. Here is a picture of them in the halls of Congress:

Before you get all crazy about the (apparently) professionally-made signs, here’s a web site where you can easily make them. More from Common Dreams:

Many also wore T-shirts emblazoned with the following message: “We have a right to good jobs and a livable future,” two key components of the Green New Deal, which would create 10 million jobs in the first decade by putting Americans to work building a green energy infrastructure…

At least 143 of the demonstrators were arrested as they lobbied in 50 congressional offices. But, they had an impact. The number of Democratic lawmakers now supporting a Select Committee on a Green New Dealhas now reached 31, twelve of whom signed on this week. How it came together reveals how the Congressional Progressive Caucus (CPC), will use its growing membership.

The Caucus agreed with incumbent members who were willing to have a select committee so long as actual lawmaking authority remained in existing committees.

This wasn’t all due just to the kids. Rep.-elect Alexandria Ocasio-Cortez (D-NY) has spent the past few weeks wrangling support for the Green New Deal as well. The outcome was the result of a collaboration between the CPC leaders, Ocasio-Cortez, and the Sunrise Movement.

Wrongo doesn’t know if a Green New Deal is a good idea or not, but much of the message will resonate with voters. Who will be against “good jobs and a livable future”?

And Alexandria Ocasio-Cortez is showing that she has really good political instincts.

We should be happy that these kids are speaking from their hearts. They are practicing for when they will need the strength to fight the hard political battles of their generation. But, why aren’t we seeing a million parents fighting alongside their kids?

We also should remember how undervalued kids are in America: We under fund their schools. We are providing only low-wage service economy jobs for most of them when they grow up. We hardly care whether they are covered under a health insurance plan. We take them from their parents at the border.

No wonder they are learning to act, since we, their guardians, seem unwilling to act for them.

When the President and the incoming Speaker of the House get into a televised shouting match over whether we have enough money to fund Trump’s wall, you know that things have to change in America. They’re fighting over use of a limited resource, the US government’s funding.

We now have within our means the ability to feed, clothe, shelter, and educate everyone. But, as a country, we are unwilling to do so, because we buy into neoliberal economic theory. Never in history have we had the ability to make our species as secure as we do now, but we choose instead to make as many as insecure as possible.

Until about 1980, economic growth created a level of prosperity that earlier generations of Americans could only dream about. But, economic growth no longer makes people more economically secure. We’ve become prisoners in a system that promotes permanent growth, where wages stagnate, schools decay, and Goldman Sachs sits inside our government.

The question we should be asking is: How can our politics provide an answer to our people’s need for economic security? We know that neoliberalism has reduced many of our people to states of economic insecurity. We know that our economic and social order must change, and profoundly, or face an eventual revolution. This isn’t an option, it’s a certainty.

That means that only state funding will create the (peaceful) change we need.

…To put this another way, what may be the biggest programme of change ever known in human history is required in very short order. We need new energy systems; transformation of our housing stock; new transport infrastructure; radically different approaches to food that might even require rationing if we cannot create change any other way; different ways of working and new ways of using leisure time.

Murphy goes on to say:

But this must be done in a way that increases certainty. Jobs must be created on the ground…And I mean, in every constituency….but the transport and other infrastructure must be provided in that case and that does not simply mean more roads. The social safety net must be recreated. That means a job guarantee. It also means a universal basic income. And business must be transformed. Since that process will be incredibly expensive this requires capital and if that means state investment and co-ownership, so be it.

Murphy says that if this was wartime, our government would find the money to fund radical change. He says that we can no longer just extract higher taxes from the rich to solve our funding requirements, we need to create a vision, a plan and funding to achieve the change required.

One way to fund a portion of these requirements may be to restrict funding for the military, to eliminate tax breaks and subsidies for corporations. More from Murphy:

The time for pussy-footing is over. We know what we need to do. We know the scale of the issue. We know the reasons for acting….and we know we can pay for it. This is not left or right as we know it. And any party not addressing it is part of the problem and not the solution.

He’s suggesting deficit financing for societal gain. What are the chances that revolutionary change can happen? Almost zero today. Left to our political class, we’re just going to keep on doing what we’re currently doing, that is, until we can’t.

But, in the Middle Ages, the exact same thing could have been said about feudalism. That institution was deeply entrenched, it was “how things are, and were meant to be.” It was inconceivable that something like democratic government could ever succeed feudalism, yet it did.

Today, our revolutionary task is to allow democracy to express its full potential to reshape and revitalize our social and economic life.

We must begin by setting priorities, taking resources from areas that drain the economy. Then we need to devote those resources to things that will make for a healthier, more secure economy.

One example is to adjust the priority that military defense spending has in our economy. Let’s stop being the world’s policeman, nobody wants us to do it. Then, use the excess resources to build infrastructure, and renewable energy systems.

Everything else we need then will become easier to build.

It’s a matter of deciding what our priorities are, and voting for those who agree with that vision.

Plague Fort (or Fort Alexander), St. Petersburg, RU. It was built between1838 and 1845 on an artificial island in the Gulf of Finland. From 1899 to 1917, the fort housed a research lab focused on plague and other bacterial diseases.It was abandoned in 1983.

The Economist has an 8500-word interview with the documentary film maker, Adam Curtis. For 30 years, Curtis has produced documentaries on politics and society. Apparently, he has emerged as a cult-hero to the UK’s young thinkers trying to comprehend our chaotic world.

His latest film, “HyperNormalisation” (you can view the trailer here, or watch the entire 2+hour documentary here) argues that governments, financiers, and technological utopians have, since the 1970s, structured a simple “mostly fake world” for us, run by corporations, and kept stable by politicians.

Wrongo was attracted to this in part because Curtis takes the title of his documentary from work by a Russian historian, Alexei Yurchak, now a professor at Berkley. He introduced the word in his book Everything Was Forever, Until It Was No More: The Last Soviet Generation (2006). Yurchak says that in the 1980s, everyone from the top to the bottom of Soviet society knew that it wasn’t working. They knew that it was corrupt. They knew that the bosses were looting the system. They knew that the politicians had no vision. And they knew that the Party bosses knew they knew that.

Everyone knew it was fake, and they just accepted the fakeness as normal. Yurchak coined the term “HyperNormalisation” to describe that feeling. When Wrongo was in Russia in October, he heard a few Russians express this exact idea about the end stages of the Soviet Union in the 1980s.

The fall of the Soviet Union didn’t stop them from despising Gorbachev, who ended the state economy and replaced it with a less-than-functioning market economy. They longed for the simpler state of affairs, with less to think about, and less to worry about. Where everyone knew that the system didn’t work, but they all had jobs, and there was food in the markets.

2018 America is far from being the Soviet Union, but this is exactly the way the US is today. In most ways, everything the government touches, like elections, environment, tax policy, and health policy, could be substantially better for all of our citizens.

We all know everyone is unhappy, but everyone just says, “It’s the system. We can’t change it.”

A quote from Curtis:

There is a sense of everything being slightly unreal; that you fight a war that seems to cost you nothing and it has no consequences at home; that money seems to grow on trees; that goods come from China and don’t seem to cost you anything; that phones make you feel liberated, but that maybe they’re manipulating you, but you’re not quite sure.

He talks about the concept of “risk”, and how it entered our discussion, migrating from finance to politics in the 1980s. Today, everything has become about risk analysis, and how to stop bad things happening in the future: (emphasis by Wrongo)

Politics gave up saying that it could change the world for the better and became a wing of management, saying instead that it could stop bad things from happening. The problem with that is that it invites all the politicians to imagine all the bad things that could possibly happen—at which point, you get into a nightmare world where people imagine terrible things, and say that you have to build a system to stop them.

Can the people take power back from corporations and their captured politicians? Maybe, maybe not. People like stability and they fear instability. We saw that with Gorbachev in Russia in the 1980s.

But if we are to move past the collusion of corporations and politicians trying to keep us accepting things we know are unacceptable, we need to have better politicians.

The job of a master persuader is to tell a story that says, “Yes this is risky, but it’s also thrilling, and it might lead to something extraordinary”. The persuader must say, “Yes, I understand your fears but look, what’s happening isn’t right. We can do better than this”.

People are asking, “What is our future? What is this existence for?”

If you live in West Virginia surrounded by people taking opioids, you surely want to know what all that sorrow is for

If you are a recently laid-off GM worker, you’re asking the same thing

If you’re a student with $75k in student debt, and a cog job, you’re asking the same thing

If you’re a plumber with no health insurance and pancreatic cancer, you’re asking the same thing

If you’ve worked hard to elect someone who just lost because of ballot-stuffing, you’re asking the same thing

These are the questions that our politicians should be answering.

Do you see someone who can bring people together behind a better vision?

Concentration of wealth in America causes concentration of political power.

Sanders had spoken at (his wife Jane’s) Sanders Institute in Vermont on Wednesday. In his subsequent interview, Bernie said:

But it is not just that the one tenth of 1 percent owns more wealth than the bottom 90%. They don’t put their wealth underneath their mattresses….They use that wealth to perpetrate, perpetuate their power. And they do that politically. So you have the Koch brothers and a handful of billionaires who pour hundreds of millions of dollars into elections, because the Supreme Court gutted the campaign finance laws…and now allow billionaires quite openly to buy elections.

We all know that wealth equals political power. Sanders gave a great example:

Lloyd Blankfein, the head of Goldman Sachs, came to Congress a few years ago…after the taxpayers of this country bailed them out because of their greed and their illegal behavior…..These guys, after getting bailed out, they come to Congress. They say, you know what we think Congress should do is…cut Social Security, and Medicare, and Medicaid. And by the way, lower corporate tax rates and give more tax breaks to the wealthy. That’s power. That’s chutzpah. We have it all, we can do whatever we want to do.

He closes with this:

My vision is that we have got to have the guts to take on Wall Street, take on the pharmaceutical industry, take on the insurance industry, take on the 1 percent, and create an economy that works for all.

….We’re seeing great young candidates who didn’t wait on line for 20 years to get permission to run, but kind of jumped in and beat some long-term incumbents. They’re saying, hey, I come from the community. I know what’s going on in this community, and I’m going to fight for working people, and I’m not afraid to take on big money…..So a two-part approach…..we need to fight for our agenda. We need to elect candidates from the grassroots who…are going to implement that agenda.

Bernie is the best messenger about our urgent need to reform capitalism.

In a similar vein, Seth Godin wrote last week about what he calls “Linchpin Jobs”. These are jobs that few can do, and which contribute greatly to society. That’s an interesting concept, but Wrongo focused on his apt description of “Cog Jobs”, which anyone can do, and which can be done with little effort, or skills: (emphasis by Wrongo)

Industry offered a deal to the worker:

Here’s a job. We’ll pay you as little as we can get away with while still being able to fill the job. We’ll make sure it’s easy to find people for this job, because we don’t want you to have much in the way of power or influence….In return, you’ll work as little as you can get away with. That’s the only sane way to respond to the role of being a cog.

This is the dilemma that faces low-skilled workers today: They can find work, but they can’t live on what they make at only one job. Clearly, cog-like work doesn’t create nearly as much value as intelligent work, but not everyone can find a linchpin job, they’re rare.

Can the paradigm that concentration of wealth equals concentration of power be shifted? Is Bernie Sanders the next FDR? While Wrongo thinks we need a younger leader to reform capitalism, Bernie is the right messenger for reform. His effectiveness as a messenger is clear when we see that 70% of the American people now support Medicare for All, just two years after his 2016 campaign.

And the message is clear. Without reform, we’ll have to look our grandchildren in the eye, and say we’ve wrecked their future.

Time to wake up America! This is the signal issue of our time. The reform of Capitalism must be at the top of our agenda.

Whomever the Democrats nominate for president in 2020 has to be a person that can start America down the road toward reducing the concentration of both money and power in America.

The choice in 2020 will either be more Trump, or a Democrat.

We shouldn’t select another tepid corporate Democrat. They probably won’t win. If by some chance one wins, we’d have to watch as our society becomes even more unequal for the rest of our lifetimes.

Who Inspires Wrongo

Who is the Wrongologist?

The Wrongologist is a Managing Director of the Ledgewater Group, owner of the Wrongologist Blog. Previously for 11 years, he was a division president for a $14+ billion S&P 500 company, managing 1000 employees in multiple locations. Earlier, he was managing director for an investment banking firm, specializing in technology companies. He spent 14 years as a VP in the Asia Banking Group for a top 3 US bank. He served as an officer in the US Army during the Vietnam era, leading a nuclear missile unit. The Wrongologist enjoys road biking and showing dogs in AKC events. He holds a degree in Foreign Service from Georgetown University.

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Quotes We Like

“You know, that might be the answer – to act boastfully about something we ought to be ashamed of. That’s a trick that never seems to fail.” – Joseph Heller

About Background Photo

The photo is of Detroit's Mark Twain Library, It was closed in 1996 for renovations and never reopened.
Photo by Brandon Davis